Back to top

Analyst Blog

Zacks Equity Research

Will BlackRock (BLK) Be Able to Beat Q3 Earnings Estimates?

STT SNV RJF BLK

Trades from $3

BlackRock, Inc. (BLK - Free Report) is scheduled to announce its third-quarter 2016 results on Tuesday, Oct 18, before the market opens.

This New York-based asset manager’s earnings lagged the Zacks Consensus Estimate last quarter. Lower expenses failed to counter the revenue headwind witnessed during the quarter.

Nonetheless, shares of BlackRock have gained more than 6% during the third quarter, indicating that investors cheered the company’s activities. Further, the company has a decent earnings surprise history, as evident from the chart below:

BLACKROCK INC Price and EPS Surprise

BLACKROCK INC Price and EPS Surprise | BLACKROCK INC Quote

Earnings Whispers

Will BlackRock be able to reverse the trend this earnings season? Or will the company again succumb to broader economic challenges? Before we go into a detailed discussion about the factors that are likely to influence the results, let’s check what our quantitative model predicts.

Our quantitative model predicts that an earnings beat is quite likely. Here is what it indicates.

Chances of BlackRock beating the Zacks Consensus Estimate in the third quarter are high. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.

Zacks ESP: The Earnings ESP for BlackRock is +0.60%. This is because the Most Accurate Estimate of $5.07 is above the Zacks Consensus Estimate of $5.04.

Zacks Rank: BlackRock currently carries a Zacks Rank #2 (Buy). This further increases the chance of an earnings beat.

In addition, the Zacks Consensus Estimate for BlackRock has been witnessing upward revisions over the last 30 days. Also, the estimate of $5.04 per share for the upcoming release indicates a year-over-year rise of 0.8%.

Factors to Impact Q3 Results

Though BlackRock continues dominating the ETF market with its brand initiatives for the iShares and ETF business, macroeconomic factors may adversely impact the company’s results.

Therefore, revenue growth is likely to remain challenging, while the company’s efforts to grow its iShares and Retail offerings will help it scale up its assets under management (AUM) and boost margins. Notably, a sequential increase in margin is anticipated in the quarter due to the projected increase in average AUM.

In the recent quarters, BlackRock attracted substantial funds in its index offerings. However, the active funds failed to generate alpha or premium returns. This trend is expected to have continued in the third quarter.

However, expenses are likely to be on the higher side during the quarter due to a rise in employee compensation costs, as the performance of funds is expected to be better than the previous few quarters. Nonetheless, the company expects G&A expenses to remain stable in 2016 on a year-over-year basis.

Other Stocks Worth A Look

Here are a few finance stocks worth considering as they also have the right combination of elements to post an earnings beat this quarter.

Synovus Financial Corporation (SNV - Free Report) has an Earnings ESP of +2.00% and carries a Zacks Rank #3. It is scheduled to report results on Oct 18.

State Street Corporation (STT - Free Report) is slated to release results on Oct 26. It has an Earnings ESP of +0.80% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raymond James Financial, Inc. (RJF - Free Report) has an Earnings ESP of +2.04% and carries a Zacks Rank #2. The company is slated to release results on Oct 26.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>